Why Does It Take Two Days for an E-Payment to Move Between Two Big US Banks?

When I use online banking to instruct Very Major National Bank #1 to send a payment to my credit card run by Very Major National Bank #2 at a future date, the website at VMNB#1 tells me it will be sent by “electronic payment”. Yet it takes two days for the e-payment to show up as received at the credit card account run by VMNB#2.1 This is not much of an advance over writing a paper check.

Can inter-bank electronic payment really be that slothful? VMNB#2 says I should ask VMBN#1 why it takes so long. And indeed, VMNB#1’s web site does say, in a well-buried FAQ, that

If the payment is electronic, you should allow at least 2 business days for it to be received and processed.

So this is a feature, not a bug. VMNB#1 debits my account the day after I instruct it to send the payment — that is, one day before VMBN#2 credits it. Are they just splitting the float?

Update: Just to clarify–On Day one I instruct VMNB#1 to send a payment to VMNB#2 on Day 10. On Day 11 VMNB#1 debits my account. On Day 12 VMNB#2 shows a payment to my credit card account. The point of mentioning the advance directive is that there’s nothing last-minute or surprising about the payment instruction that could explain the delay. [↩]

6 Responses to Why Does It Take Two Days for an E-Payment to Move Between Two Big US Banks?

I pay my bills on-line and, given that electronic transactions are instantaneous, if I have a bill due on the 10th I insist that my bank pay it … On The 10th! (Weekends / holidays excepted).

So when my bank Wachovia was bought by Wells Fargo and adopted the Wells Fargo policy of requiring 3-5 days for an electronic payment to clear, I looked for another bank that would adhere to the old Wachovia policy of paying instantaneously. And LO – the only bank I could find here in S Fl that still did it that way was (ugh) Bank of America.

So I’m with BOA – again (double ugh – I do have to swallow hard sometimes, in order to indulge my little financial games … ; ))

I would imagine that, crudely speaking, the cash available to a bank which plays this kind of float must amount to approximately 1 percent of their total yearly payment transactions. Must be millions and/or billions – which they can then turn around and invest. And all because they require that customers pay their bills a few days early.

It used to be five business days. I remember trying to move some money into an escrow account in the late 80s, and being shocked at how long an electronic transfer would take. When I sold a piece of land recently, I was pleased to see that they’ve sped up the process to a mere two business days, and that the money was actually available in less than 36 hours. I imagine they’ll get it down to less than a day by 2050.

Monday overnight it goes out via EDI to Bank B and your account is debited.

Bank B has already made its EDI pickup of the night, so it effectively site in their EDI mailbox until they pick it up on Tuesday overnight.

The do so Tuesday night , and credit your account in their overnight batch run.

So you see the money at bank B on Wednesday.

THAT’S how it can take two days and that’s how it used to work for sure. Does it STILL work that way? I don’t know. SHOULD it still work that way? I don’t know. But inter-bank transactions are not you writing a check for your FPL bill, so there is real security and process in place, so it would not surprise me at all if it is still done like it was 20 years ago.

Wells Fargo Bill Pay earns interest off of your float time. A banking transaction requires a Debit & Credit. When you order Bill Pay you are Debited & WF is Credited. When the check is finally cashed at BoA, WF is Debited and BoA is Credited which is two transactions when only one was needed. This scheme was established so that WF can float your money. WF may take 14 days to clear a check and you are fined for being late while WF gets interest on your money due to the float time. Big companies pull your funds out immediately through an ACH account which is not available to consumers who get used and abused. Happy Banking & hope WF pays on time?